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Fuel supply to Air India stopped at six domestic airports: sources

The Air India logo is seen on the facade of its office building in Mumbai

By Aditi Shah and Sudarshan Varadhan

NEW DELHI (Reuters) - Jet fuel supply to state-run carrier Air India has been stopped at six domestic airports because of unpaid dues to fuel provider, Indian Oil Corp (IOCL), three sources said on Thursday.

"Jet fuel supply to Air India has been stopped for commercial reasons at six airports," a source at Indian Oil Corp told Reuters.

India, for years, has propped up the debt-laden airline by infusing equity to keep it alive - the government injected 39.75 billion rupees ($553 million) into Air India in the fiscal year that ended on March 31.

"In the absence of equity support Air India cannot handle the huge debt service liabilities," the airline said in a statement, adding its financial performance was improving.

Fuel supply to Air India has been halted since Thursday evening at six cities across the country including Mohali in the north, Vishakapatnam and Kochi in the south, Pune in the west and Ranchi and Patna in the east, one of the sources said.

India's aviation sector is facing turmoil with one of its biggest private carriers, Jet Airways in bankruptcy, while passenger growth in the market overall has slowed.

The government failed last year in its attempt to sell a 76% stake in Air India due to a lack of interest from bidders who said they found some of the stake sale terms too onerous, making it a non-starter.

It is now redrawing the stake sale plans and as part of the effort it has hived off some of the loss-making airline's debt of $8.5 billion.

India may now consider selling up to a 100% stake in the airline, a government official told Reuters in July, adding that it expects to get 150 billion rupees ($2.1 billion) from selling the airline.